Tesla Cuts Prices for Second Time This Year
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Tesla Inc. marked down all of its vehicles again in the U.S. after price tweaks throughout the first quarter yielded an incremental sales gain.
The company discounted each version of its higher-volume Model 3 and Y electric vehicles by at least $1,000, and versions of its costlier Model S and X vehicles by $5,000. It also introduced a new base version of the Model Y starting at $49,990.
This is the second broad-based markdown for Tesla this year, following cuts across the lineup in mid-January.
CEO Elon Musk has said he’s willing to sacrifice Tesla’s profitability to keep growing in the face of rising interest rates and a possible recession. The company is in the rare position among EV makers of having big profit margins to work with, as incumbents including Ford Motor Co. and newer entrants like Rivian Automotive Inc. and Lucid Group Inc. struggle to make money at lower volumes.
Musk
After Tesla’s first lineup-wide price cuts early this year, Musk said on a Jan. 25 earnings call that orders were running at almost twice the rate of production. But the company was unable to sustain that supply-demand dynamic: Deliveries rose about 4% from the fourth quarter, and Tesla produced almost 18,000 more cars than it handed over to customers.
Despite a second round of discounts to the Model S and X in early March, Tesla delivered just 10,695 of those vehicles in the quarter, the lowest since the third quarter of 2021.
Following the latest changes, Tesla has now dropped the price of each of those vehicles by at least $20,000 and as much as $34,000 since the start of the year.
The U.S. automaker also marked down vehicles in China earlier this year, triggering a price war in the world’s largest new-energy vehicle market. It shipped a total of 88,869 vehicles from the Shanghai factory in March, according to preliminary data released earlier this week by China’s Passenger Car Association.
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A significant price differential remains for Tesla’s vehicles in China, where a basic Model 3 starts at 229,900 yuan ($33,400) and the Model Y begins at 261,900 yuan ($38,086).
While Tesla continues to outpace other automakers in global EV sales, it’s facing stiffer competition than ever before from China’s BYD Co., with analysts at BloombergNEF expecting the Berkshire Hathaway Inc.-backed manufacturer to challenge for the No. 1 spot this year.
Tesla also needs to pick up the pace to keep growing at the rate investors are used to. Last year, the company fell short of its target for a 50% average annual increase in vehicle deliveries, expanding by 40%. Its growth rate slipped to 36% in the first quarter.
The Austin, Texas-based company will report earnings on April 19.
